South Africa: Newcomer BAT Lights Up JSE's Top 40 Index

Source from:  Business Day (Johannesburg) 29 October 2008 10/30/2008

BRITISH American Tobacco (BAT) yesterday made its debut as the JSE's largest traded company with a market capitalisation of R568bn after its restructuring. In terms of size on the JSE's top 40 index, BAT is followed by mining giant BHP Billiton, which has a market value of R342bn, and Anglo American, valued at R287bn. Traders said the listing helped boost the JSE's top 40 index of blue-chip stocks, which rose more than 3% yesterday. BAT's share price closed 1,5% higher yesterday at R274 - after reaching an - intraday high of R290 - with 2,3- million shares having changed hands. BAT, which is also listed on the London Stock Exchange, said the next step in its listing involved the distribution of its shares to investors in Reinet early next month. It said after its shares were distributed to shareholders in Remgro and Reinet, which has been set up by Johann Rupert as a new investment company as part of the restructuring, that Reinet would hold a small residual stake. The distributions would be followed by a rights issue by Reinet, which can be subscribed to by using BAT shares. "Based on information provided by Richemont, Remgro and Reinet in their announcements, we believe that, following the distributions, and the completion of the rights issue in mid-December, the residual Reinet shareholding in BAT is likely to be less than 10%," BAT chairman Jan du Plessis said. He said the dispersal of a large block of BAT shares would result in the group having a more widely distributed range of institutional and private shareholders, as well as an increase in its FTSE 100 index weighting from 75% to 100%. BAT sought a secondary listing on the JSE as part of a restructuring under which luxury goods group Richemont and Remgro spun off their combined 30,1% stake, a move that made the Swiss firm Europe's second-biggest luxury specialist. Remgro shares plunged 64,9% to R65 and Reinet Investments fell 35,9% to R10,80 once they traded separately to BAT shares. Portfolio manager at Coronation Fund Managers Pallavi Ambekar said BAT would now have direct South African shareholders, unlike before when investors had to purchase BAT shares through Remgro . "Nothing fundamentally changes about BAT, it just means that it has diversified shareholders with the same structure", Ambekar said. BAT is the world's tobacco behemoth operating 47 factories in 40 countries and selling its brands in 180 markets. Of its 2007 sales of € 10bn, 35,5% came from Europe, 18,7% from Asia-Pacific, 19,8% from Latin America, 14,4% from Africa and the Middle East and 10,6% from North America. BAT first-quarter profit was 21% higher on favourable currency movements and higher sales of the premium Kent, Dunhill and Lucky Strike brands. Net income climbed to € 599m in the three months to March from € 495m a year ago. Revenue rose 14% to € 2,54bn. The cigarette maker has also exploited smokers' switch to higher-priced brands such as the ultraslim Kent Nanotek in Russia. Analysts said a 12-month, $42bn wave of tobacco mergers in Europe had reduced competition, enabling companies to raise prices for their costliest brands. According to the World Health Organisation tobacco use would kill 1-billion people this century, a tenfold increase over the previous 100 years, unless governments of poor countries raised taxes on consumption and made health warnings mandatory. Enditem